INDEX:
I. Market News: In The Red
II. Heroes: PRNS, MICN, MIKE
III. Goats: CTA, LSI, GGNS, WALL, AMGN
IV. Investment News: The Daily News Checks Up on Itself
MARKET CLOSE
DJIA: 4794.86, down 7.59
S&P 500: 587.46, down .55
NASDAQ: 1039.54, down 7.34
MARKET NEWS
A bummer day to end an otherwise excellent week. Monday's editions of the Wall Street Journal and Investor's Business Daily might read "the market succumbed to profit taking." However, as always, the Motley Fool wants to know who is taking those darn profits and what in tarnation are they doing with them? Technology stocks appeared particularly vulnerable, showing that investors are still squeamish about the darned things. The Fool Portfolio, Running with the Market, MF Templar's Neocontrarian Portfolio ... it was red ink across the board!
HEROES
When the management of Prins Recycling <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:PRNS)") else Response.Write("(NASDAQ:PRNS)") end if %> yanked a previously announced 3.5 million share secondary offering today, investors drove the stocks price up $5/8 to $11 3/8. Were shareholders rejoicing over an avoided dilution? Not at all. Apparently, the management of Prins believes that its stock is too undervalued to sell new shares at the current price. Investors were apparently just stepping in to help out with the situation, perhaps in an effort to save that secondary offering.
What's a good way to make your stock price rise on a day where you pre-announce a bad quarter? Micrion Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:MICN)") else Response.Write("(NASDAQ:MICN)") end if %> seems to have discovered the secret, rising $1 3/4 to $15 by balancing the bad news with a booster shot of great news. Just after announcing that it will fall short of estimates, the company cued the trumpeters and announced a $10 million order for new semiconductor equipment. As Micrion only did $28 million in revenues in its previous four quarters, the new deal represents a pretty big chunk of change for the small capital goods manufacturer.
Michael's Stores <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:MIKE)") else Response.Write("(NASDAQ:MIKE)") end if %> jumped $1 1/4 to $12 7/8 after a friendly analyst at Nomura predicted that the company will NOT go belly up. But take the endorsement with a grain of salt --- Nomura was the brokerage that handled MIKE's secondary offering last year. In other words, Nomura has a pretty big interest in convincing people that the company is not about to go bankrupt.
GOATS
CasTech Aluminum Group Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:CTA)") else Response.Write("(NYSE:CTA)") end if %>, a producer of low-grade aluminum alloy, dropped $3 to $13 7/8 on fears of a possible new competitor. The Golden Aluminum unit of ACX Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:ACXT)") else Response.Write("(NASDAQ:ACXT)") end if %> currently manufactures sheet aluminum for cans. However, with a slowdown in the can market and a $5.9 million loss in its last quarter, ACX might be looking to "steal" some of CasTech's business. According to Tina Gregory, a spokeswoman for CasTech, there is no need for such concern, for ACX has always been considered a competitor. You make the call.
Clash of the analysts! LSI Logic Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:LSI)") else Response.Write("(NYSE:LSI)") end if %> fell $5 1/2 to $49 1/2 after SoundView Financial Group analyst Rick Whittington dropped his 1995 estimate from $1.85 EPS to $1.78 EPS. Oddly enough, on the same day, Thomas Thornhill of Montgomery Securities raised his 1995 earnings estimate to $1.74 EPS from $1.70 EPS. With the current consensus of $1.75 EPS, both analysts are just moving a bit closer to the middle. Both analysts changed their estimates after an upbeat conference call, and cited no additional factors. Apparently, investors are just panicking. LSI Logic manufactures SRAM chips.
Genus Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:GGNS)") else Response.Write("(NASDAQ:GGNS)") end if %>, plunged $3 3/4 to $9 3/8 after the company missed earnings consensus estimates by $0.04 EPS, or 22%. MF Templar currently has Genus as part of his Neocontrarian Folder, located in the "Let's Talk Investment Approaches" area. Can you say ouch? Templar can, and is, time and time again just a few feet away from me. Tune in to the folder for MF Templar's reaction to the devastating blow to his portfolio. Genus Inc. manufactures semiconductor equipment.
WALL Data <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:WALL)") else Response.Write("(NASDAQ:WALL)") end if %> dropped $2 to $16 when it reported earnings in line with estimates. So why did it fall? The company stated today that its cost for its "Salsa" software will rise next quarter. WALL Data also makes "Rumba" software, but the company is apparently doing a slow waltz as a result of today's news.
Biotechnology company Amgen Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:AMGN)") else Response.Write("(NASDAQ:AMGN)") end if %> met estimates today, but fell $4 1/4 to $46 1/8 over third quarter concerns of its key cancer-chemotherapy drug, Neupogen. Factoring out a 2.5% increase in the price, sales of Neupogen were actually flat. In addition, clinical trials for an alternate use of Neupogen failed. Brown Brothers Harriman & Co. analyst Robert Leboyer downgraded his near-term rating from Buy to Hold.
INVESTING NEWS: Recapping Some Old Calls
After the warm reception our story yesterday on Apple Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:AAPL)") else Response.Write("(NASDAQ:AAPL)") end if %> received in the folder, the News staff here at Fool Global HQ decided that it would reprise some of its more opinionated stories of the last few months and see where those puppies are today. Was the Daily News right or wrong in its painfully honest attempts to alert investors to diamonds and dogs? Nothing less than total accountability here at Fool HQ --- every single story ever written by the Daily News is under that button titled "Old News Pile" to be dredged up and thrown in our face. Here are the highlights we found:
Kmart --- Friday, October 6th
<<Is It Over for Kmart?>> was the provocative title of a piece on the discount retailer where the Daily News questioned the long term viability of the companies current business plan, which basically involved selling off all of its good parts to fund an exorbitant dividend, focusing on its money losing discount retail operations. When we wrote this piece, Kmart stood tall at $12 3/4, having just announced the third quarter would come in below expectations. The next day Wall Street was rife with concerns that the discount retailer would file for bankruptcy. The stock currently sits at $10, down 21%.
486 Chips --- Wednesday, September 27th
<<486 Chips Heading For the Museum?>> asked the Daily News, wondering why anyone would buy stock in a company that made the darn things. Apparently, no one wanted to. We profiled OPTi, Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:OPTI)") else Response.Write("(NASDAQ:OPTI)") end if %>, Advanced Micro Devices <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:AMD)") else Response.Write("(NYSE:AMD)") end if %>, Cyrix <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:CYRX)") else Response.Write("(NASDAQ:CYRX)") end if %> and NexGen <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:NXGN)") else Response.Write("(NASDAQ:NXGN)") end if %> in our story and the problems each one faced as the 486 got phased out faster than anticipated. OPTi was at $13 1/8 when we penned this story and currently can be had for $10 1/2 -- a 20% difference. AMD was trading at $29 1/4 currently sits at $26 1/8, down 11%. NexGen closed at $19 3/8 that fateful day, but has managed to claw its way up to $21 1/4 -- a 10% rise. Lastly, Cyrix and its 6x86 chip that now competes the Pentium was going for $39 3/4 then and changed hands at $38 7/8 today, a measly 2% difference.
Oracle Corp. --- Tuesday, September 5th
<<David and Goliath?---Oracle vs. Microsoft>> read the headline as the Daily News was fired up by Oracle Corp. CEO Larry Ellison's speech over in Paris on the state of the Information Superhighway. "This guy's taking out Gates," MF Templar was muttering, wandering around Fool HQ in a daze. Ellison's vision of a networked society connected with cheap terminals that connect to huge databases run by media giants just overwhelmed the poor guy. Oracle closed at $44 1/4 that day and now is going for $42 5/8, a mere 4% difference. Okay ... so maybe that vision will take more than a month to be realized.
Intel Corp. --- Monday, August 21st
<<Intel's Ruthless Price Cutting>> is the line that captivated readers, drawing them into a curt article stressing that Intel's strategy of dominating the central processing unit (CPU) market by slashing prices to bare bones levels might hurt the stock over the next few quarters. The News reminded faithful readers that falling margins late in a chip cycle had kept Intel's price down throughout most of 1994, with the Pentium bug debacle keeping it down even more. However, the Daily News did see Intel benifiting long term from such a move and saw the 486 makers as the ones in trouble. Intel could be had for $60 1/4 that day and currently goes for $67 1/8, up 11% and suggesting that we might have been over-cautious. However, AMD, $34 3/8 that day is now down 24%, while Cyrix, profiled at $31 1/4, is actually up 24% -- only because it managed to develop a competitor for the Pentium. Unsure what make of this one, we'll call it a draw.
US Robotics --- Monday, July 26th
<<US Robotics Moving As Fast As Their Modems>> announced the Daily News, writing up US Robotics on the day it blew past consensus estimates. Two days before, the News had profiled US Robotics among a few other online stocks asking the perennial question, is there a way to "play" the online world? The Daily News staff emphasized that modem makers, long thought of as just equipment manufacturers, actually were stealth software companies and could be accorded those multiples at some point. US Robotics, which went for $70 1/2 (split-adjusted) on that day, proved us right again, sitting pretty at $94 currently, a 33% increase. Maybe we should take our advice more often.
Well, this has been an interesting exercise which we will explore again soon.
Keep the faith, Fools. Have a great weekend!
Byline: Befumo/Sheard (MF Templar/MF DowMan)